Tax Question
question: I brought 4 properties this year each one is currently being rented. What I want to know is should I report this income as rental royalties or report it on a schedule C as a busines income. Advantage/disadvantage.
If you are a plain vanilla landlord, renting with no immediate intent to sell, then all your income and expenses are reported on Schedule E.
If you are a landlord-seller, renting to your tenant-buyer on a lease option, then you may have to report on Schedule C and Schedule SE. When the option to purchase is exercised, ordinary income tax rates apply. We would need to discuss some details behind your investment strategy before deciding that this tax reporting approach applies to you.
If your average rental term is less than one week, such as you might find in a high-traffic resort area, then you are running a business rather than operating an investment rental property.
Which type of owner-landlord are you?
thanks DaveT, right now I am just a plain vanilla folder landlord, so I would use a schedule E?
Rental property is a passive income activity, so you do not have to worry about Schedule C nor self-employment income taxes.
Schedule E is right for you.
on a similar note, i bought a property last year and its rented out.
so i use schedule E. can i deduct travel expenses used to look for other properties and business meals when i meet with agents, brokers and other investors. i bought another property first week of the year that 's 150 miles away.
Am i in the business of real estate investing? would i be if i gave a loan of some other investor's property?
thanks.
Offhand, I would say no. Rental property is a passive income activity. You can deduct travel expenses to visit your property on the Schedule E.
Perhaps you can even deduct the travel costs of looking for a property IF the trip resulted in the purchase of another rental property.
In my opinion, all the other "expenses" you list are typically associated with an active business. If you file a Schedule C, and these expenses had a legitimate business purpose, then I would say deduct them. It is hard for me to find a legitimate purpose for deducting a lunch with a realtor that is not directly related to the rental property you are reporting on Schedule E.
Just my opinion, but I am ultra-conservative on this issue.